FACULTY OF ADMINISTRATION SCIENCE AND POLICY STUDIES

BACHELOR OF ADMINISTRATIVE SCIENCE (HONS)

INDIVIDUAL ASSIGNMENT

COURSE NAME: ADVANCED BUSINESS LAW

COURSE CODE: LAW503

NAME : NOR SURIYANI BINTI SHAFEI

MATRIC NO: 2015466266

EMAIL: 2015466266@student.uitm.edu.my

GROUP: NAMAF5B

LECTURER: DR. FARIDAH BINTI HUSSAIN

CONFIDENTIAL

FACULTY OF LAW

Question 1
Explain the following:
(a) Any 2 examples of the rights of buyer and seller under the Sale of Goods Act 1957.
(10 marks)

Answer:

Section 4(1) of the Sale of Goods Act 1957; A contract of sale of goods is a contract whereby
the seller transfers or agrees to transfer the property in goods to the buyer for a price. There
may be a contract of sale between one part-owner and another.

From the definition, there are 2 types of contract:

1. Contract of sale: when the seller transfers the goods.
i. Ownership passes to the buyer at the time of the sale. If the buyer breach
of contract, the seller can claim the price of the goods because the
ownership has passed to the buyer.
2. An agreement to sell: when the seller agrees to transfer.
ii. Ownership passes to the buyer in the future. If the buyer breaches the
contract, the seller can claim the return of the goods.

Implied condition as to title, Section 14(a) of the Sale of Goods Act 1957; the implied
condition is that the seller must have the right to sell the goods (ownership/title). Based on the
Rowland V Divall case, the plaintiff bought a car and after using it for 4 months, it was
discovered that the car was stolen. The true owner claims the car. He had to return it to the
true owner. Held: the defendant had breached the condition. The plaintiff has a right to
repudiate the contract and claims the full price from the defendant.

Implied warranty as to quiet possession: Section 14(a) of the Sale of Goods Act 1957; the
buyer shall have and enjoy quiet possession of the goods. Referring to Microbeads A.G V
Vinhurst Road Marking Machine case, the patentee, a third party, had brought an action against the
buyer alleging the use of certain road marking machines was in breach of their patent 2 years after

1
the sale of the machines by the plaintiff to the defendant. Held: There was a breach of implied
terms because the buyer did not enjoy the future quiet enjoyment of the goods.

Implied condition as to merchantable quality: Section 16(1)(b) of the Sale of Goods Act
1957; goods bought shall be of merchantable quality. Merchantable quality means that the
goods are fit for the particular purpose to which they are bought. If it is defective for that
purpose, it is unmerchantable. There are two requirements for the buyer to rely on this section;
which is the goods are bought by description or the goods are brought from a seller who deals
in goods of that description, whether he is the manufacturer or producer or not. Section
16(1)(b) of the Sale of Goods Act 1957; applies to the goods sold under patent or trade
name. Based on Wilson V Ricket, Cockerall & Co Ltd. Case, a buyer ordered fuel from a
seller by its trade name Coalite. The goods were contaminated with the detonator, resulting in
an explosion in the fireplace when used. Held: the consignment as a whole was
unmerchantable because there were defects making it unfit for burning.

Implied condition as to sale by sample: Section 17 of the Sale of Goods Act 1957; usually
the buyer will look at the sample when there is a sale of goods in bulk such as rice, flour, tiles,
carpet, etc. Conditions to be considered are the bulk shall correspond with the sample in terms
of quality, the buyer shall have a reasonable opportunity to compare the bulk with the sample,
and the goods are free from any defect rendering them unmerchantable. According the 3
conditions are independent of one another. Breach of any one of the entitles the buyer to reject
the goods and treat the contract as at the end. Referring Drummond V Van Ingen case, the
cloth supplied by the seller was equal to the samples previously examined. However, there
was a latent defect not discoverable by a reasonable examination. Held: the seller was held
liable because even though the bulk corresponded with the sample, there was a latent defect
rendering the goods unmerchantable. The buyer was entitled to reject the whole goods.

2
 (b) Explain how a contract of agency can be created and terminated.
(10 marks)
Answer:

Agency is the relationship between principal and agent.

Section 135 of the Contracts Act 1950;
An “agent” is a person employed to do any act for another or to represent another in
dealings with third persons. The person for whom such act is done, or who is so
represented, is called the “principal”.

Effects: There are 2 separate contracts:

1. Contract of agency between the principal and the agent
2. Law of the contract between the principal and the 3rd party.

Qualification:
1. Principal – section 136 CA: principal must be the age of majority and sound mind.
2. Agent – Section 137 CA: any person may become an agent but an agent who is a
minor or unsound mind is not responsible for his actions.

CREATION OF AGENCY
1. Agency by express appointment by the principal
Section 139 of the Contract Act 1950; Authority of an agent may be express or implied.
Section 140 of the Contract Act 1950; Authorization can be in writing or oral.

2. Agency by implied appointment

a. Implied by the circumstances of the case. When one person by his words or conduct
holds out another person as having authority to act for him.

b. Implied by relationship between husband and wife.

i. It is implied that the wife is an agent to the husband and she has authority
to pledge her husband’s credit.
ii. However, if the husband can prove any of this, he need not pay for the
goods. The wife would be personally liable.
 He expressly forbids his wife from pledging his credit.
 He expressly warned the tradesman not to supply his wife with
goods on credit.

3
  His wife was sufficiently provided with the goods.
 His wife was given sufficient allowance to buy goods without
pledging her husband credit.
 The order was unreasonable with her husband’s income even
though it was necessary goods.

c. Implied by the Partnership Act 1961. Section 7 states that a partner is an agent to
his firm and another partner.
Case: Chan Yin Tee V William Jacks
Facts: Chan told William Jacks that Yong, a minor is his partner. Yong ordered goods
for the business but Chan refused to pay.
Held: agency relationships exist between Chan and Yong by referring to their conduct
and thus, Chan has to pay for Yong’s order.

3. Agency by ratification
Agency by ratification arises in 2 situations:
i. An agent who is appointed exceeded his authority.
ii. A person who had no authority to act but acted as if he has the authority.
According to section 149, the principal has choices:
i. To ratify – the principal liable
ii. Disown the act – agent liable
However, there are 8 conditions need to be fulfilled before the principal ratifies:
i. The act must be unauthorized or the agent has exceeded the authority.
ii. The act must be recognized by law.
iii. The agent must expressly act as an agent for the principal at the time of
contract.

Case: Keighley Maxted V Durant

Facts: An agent bought wheat at a price higher than authorized by the principal in his
own name.
Held: principal could not ratify the contract. Agent would be personally liable to pay the
price of the wheat.
iv. The principal must be in existence and have contractual capacity at the time of
the contract.

4
 v. The principal must have contractual knowledge of all material facts of the
contract: S.151 CA. In Marsh V Joseph, the ratification was void because the
principal was not aware of the contract when it was made.
vi. The principal must ratify the whole contract, not only the part that is beneficial
to him: S. 152 CA
vii. Ratification must be made within a reasonable time.
Case: Metropolitan Asylum Board V Kingham
Held: ratification 1 week after the agent bought eggs was too late.
viii. Ratification must not injure the interest (causes loss) to 3rd party: S. 153 CA

4. Agency by necessity
Section 142 of the Contract act 1950; An agent has authority, in an emergency, to do
all acts for the purpose of protecting his principal from loss as would be done by a
person of ordinary prudence, in his own case, under similar circumstances.

A person can become an agent by necessity without a formal appointment by the

principal in an emergency case. However, some kind of contractual relationship must
already exist between them (example: a contract to deliver goods).

Case: Great Northern Railway Company V Swaffield

Facts: the plaintiff, railway company carried the defendant’s horse to its destination.
On arrival, there was no one to meet. Since the station master did not know the
defendant’s address, he instructed that the horse be put in the stable. Later, the railway
company claimed the charges from the defendant. The defendant refused to pay.
Held: the railway company had acted as agent of necessity. The horse need to be kept
safe in the stable. Therefore, the claim was successful.

Three conditions must be fulfilled:

i. The agent’s action is necessary to prevent loss to the principal In Phelps James
Company V Hill, agency by necessity does not arise if there is no real urgency
for example where the goods are sold because they were inconvenient from
the principal.
ii. It is impossible for the agent to communicate and get further instruction from
the principal. Agent must use all reasonable diligent to communicate with his
principal.

5
 Case: Springer V Great Western Railway Company
Facts: The defendant was supposed to carry the goods (tomatoes) to its destination,
sold the goods in the middle of the journey without trying to communicate with the
owner when it is possible to do so.
Held: no agency by necessity.

iii. The agent must act in good faith and be reasonable in the circumstances. Good
faith means good intention, not because of personal interest.

5. Agency by estoppel or holding out – section 190 of the Contract Act 1950;
a. If the principal himself by his words or conduct, allows a 3rd party to believe
that a person has an authority to act for him, the principal is stopped from
denying the agent’s authority.
b. When the principal does not inform to the 3rd party that his agent has no
authority, or the agent’s authority had been terminated, but the agent still
continues acting on behalf of the principal.
Case: Freeman & Lockyer V Buckhurst Park Properties Ltd
Facts: Mr. Kapoor without authority, hired a firm of architects and surveyors to
do work for the company. The other directors even though had knowledge
about this did not inform the third party that Kapoor had no authority. Third-
party sued the company for payment.
Held: the company was precluded from denying Kapoor’s authority to act for
them. Agency by estoppels has existed between Kapoor and the Company.
Therefore, the company was liable to pay the firm.

Section 154 of the Contracts Act 1950;

An agency is terminated by the principal revoking his authority; or by the agent
renouncing the business of the agency, or by the business of the agency being
completed; or by either the principal or agent dying or becoming of unsound mind; or
by the principal being adjudicated or declared a bankrupt or an insolvent.

TERMINATION OF AGENCY
1. Termination by act of the parties
2. Termination by operation of law.

6
 1. Termination by act of the parties
a. Mutual consent
 The principal and agent may terminate their agency relationship by
mutual consent between them. Once they agreed to terminate the
agency, the agent has no longer any authority to act on behalf of the
principal, and the principal would not be liable for any contract made by
the agent after the termination.
b. Unilateral termination
 Revocation by the Principal or renunciation by agent
Section 156 of the Contract Act 1950; The principal may revoke the
agent’s authority at any time before the agent has exercised the
authority.
Section 158 of the Contract Act 1950; Where the agency is for a fixed
period, the principal and agent cannot terminate the authority unless
there is lawful justification. Otherwise, the agent or principal is liable to
pay compensation.
Section 159 of the Contract Act 1950; the principal/agent must give
reasonable notice for the termination. If no notice, the agent/ principal
can claim for damages. Reasonable notice depends on the
circumstances of the case.

In Sohrobji V Oriental Security Assurance it was held that a notice of 3 and half months was
inadequate to terminate 50 years’ agency relationship. The reasonable notice is two years. In
the case of Syarikat Jaya V Star Publication, 6 months’ notice was reasonable to terminate a
sole agency relationship.

2. Termination by operation of law:

When the business of agency is completed
a) By expiration period agreed by both parties
b) By death of agent or principal.
c) By subsequent insanity of agent or principal. In the case of Younge V Tonybee, it
was held that the agent is liable to the third party because he acted without the authority
when the principal become insane.
d) By bankruptcy of the principal
e) By frustration or by happening of an event which renders the agency unlawful.

7
3. Limitation / restriction
The limitation applies for termination by acts of parties and operation of law.
Section 155 of the Contract Act 1950; The principal cannot revoke the authority if it
is couple with agent’s interest. For example, if agent used his own money / advances
to the principal. In Smart V Sanders, the agent used his own money as a security to
sell principal’s goods. The principal cannot revoke agent’s authority unless the
principal paid to the agent.
Section 157 of the Contract Act 1950; the principal cannot revoke the agent’s
authority after agent already performed part of his obligation. In the case of Read V
Anderson, the principal instructed his agent, read to place bet on his behalf. The
agent places the bet using his own money and lost. The principal revokes the
authority.
Held: the principal cannot revoke the authority unless he pays and indemnify the agent.

8
 STUDENT PLEDGE OF ACADEMIC INTEGRITY

As a student of Universiti Teknologi MARA (UiTM), it is my responsibility to act in accordance

with UiTM’s academic assessment and evaluation policy. I hereby pledge to act and uphold
academic integrity and pursue scholarly activities in UiTM with honesty and a responsible
manner. I will not engage or tolerate acts of academic dishonesty, academic misconduct, or
academic fraud including but not limited to:
a. Cheating: Using attempting to use any unauthorized device, assistance, sources, practice,
or materials while completing academic assessments. This includes but is not limited to
copying from another, allowing others to copy, unauthorized collaboration on an assignment
or open-book tests, or engaging in any act or conduct that can be construed as cheating.
b. Plagiarism: Using attempts to use the work of others (ideas, design, words, art, music,
etc.) without acknowledging the source; using or purchasing materials prepared by another
person or agency, r engaging in other behavior that a reasonable person would consider as
plagiarism.
c. Fabrication: Falsifying data, information, or citations in any academic assessment and
evaluation.
d. Deception: Providing false information with the intent to deceive an instructor concerning
any academic assessment and evaluation.
e. Furnishing false information: Providing false information or false representation to any
UiTM official, instructor, or office.

With this pledge, I am fully aware that I am obliged to conduct myself with utmost honesty and
integrity. I fully understand that disciplinary action can be taken against me if I, in any manner,
violate this pledge.

Name: NOR SURIYANI BINTI SHAFEI

Matric Number: 2015466266
Course Code: LAW503
Program Code: AM228
Faculty / Campus: UiTM Shah Alam